On 13 June 2023, the European Supervisory Authorities (ESAs) published a letter to the European Commission (the Commission) on the EMIR bilateral margining framework and equity options.
In the letter the ESAs explain that in March 2016 they delivered on their mandate to develop draft regulatory technical standards (RTS) on the risk-mitigation techniques for over-the-counter (OTC) derivative contracts not cleared by a central counterparty (Bilateral Margin RTS). The Bilateral Margin RTS include a deferred date of application for non-centrally cleared OTC derivatives which are single-stock equity options or index options (equity options). This deferred date of application has been subsequently extended, together with an exemption for intragroup derivative contracts, and is currently set to expire on 4 January 2024.
The ESAs note that the topic has been discussed over the years and different views exist on the desirability of an exemption. In the letter the ESAs seek clarity from the Commission and the co-legislators on what the permanent treatment of equity options should be with respect to bilateral margining. In particular, the ESAs would welcome clarification from the Commission and the co-legislators as part of the EMIR review on what should be the applicable regime for equity options from 4 January 2024 onwards.